Healthcare performance measurement and equitable provider reimbursement system

ABSTRACT

The present invention incorporates medical knowledge into the processes and algorithms that combine inpatient quality outcomes, ambulatory quality measures and health insurers&#39; financial data into actionable information that hospitals and physicians can use to improve the efficacies and efficiencies of their care. It then quantifies the financial net savings that predictably accrue as a result of the providers&#39; improved medical outcomes. This information enables a hospital or health insurer to equitably share the net saving with the physicians and hospitals as incentives to continuously improve the quality of their patients&#39; care and control costs.

FIELD OF THE INVENTION

The technologies and techniques embodied in this invention solves themajor healthcare delivery problems of: (1) Facilitating the improvementof physicians' and hospitals' clinical and operational outcomes throughthe use of Verras' two technologies, Sherlock and Watson; (2)Objectively documenting hospitals' and physicians' improvements in themajor metrics of quality and cost efficiencies; (3) Through theinvention of the Index of Quality Improvement (IQI), to differentiatehospitals' and physicians' abilities to improve their quality andefficiency outcomes over multiple years in a transparent and easilyunderstood manner; and (4) Differentially reimbursing physicians andhospitals on the basis of quality through the use of the QualityAssurance and Equitable Reimbursement System.

BACKGROUND OF THE INVENTION

The present invention relates to technologies, processes and algorithmsthat quantify medical quality and cost efficiencies for the purpose ofcreating financial incentives for rewarding medical providers (hospitalsand physicians). The invention uses objectively defined metrics ofclinical quality and cost efficiency improvements that are trended overa multi-year period to determine an “Index of Quality Improvement”(IQI). The IQI quantifies the relative quality and cost efficiencies ofhospitals and clinical services within the hospitals (orthopedics,cardiology etc.) and determines relative reimbursement rates based onthe providers' outcomes. Higher quality and greater efficiencies yieldhigher reimbursements for the providers. More particularly, theinvention's technologies, processes and algorithms transform routinelyused, hospital and insurance data into actionable, clinical qualityinformation, which physicians can use to improve the outcomes of theirpatients' care. The invention's algorithms then aggregate the results ofphysicians' practice pattern improvements and assign appropriateprovider (physician and hospital) and insurer remunerations based on theobserved quality and cost efficiency outcomes.

Beginning in the late 1980's and up to the present, US private andpublic healthcare purchasers and their insurers have been relying onmanaged care entities to control widely varying levels of questionablemedical quality and escalating healthcare costs. To control costs, thesethird-party, managed care entities limited patients' access to theirchosen physicians and implemented stringent price controls. Thesemeasures have been only partially effective. After two decades ofmanaged care controls, the quality and costs of patient care remainuncontrolled and excessive leaving America's entire financial future inquestion.

Employers can no longer sustain their employees' cost increases andpatients are more interested in access to their physicians than in theiremployers' cost savings. For patients, access to their physicians hascome at a significant price because employers have begun to shift theircost burdens back onto the employees. The levels of angst have grown tothe point that policy makers and even some employers are now suggesting,in spite of all evidence to the contrary, that a nationalized,single-payer system is the only viable option to control costs by thealigning of financial incentives of all stake-holders (providers, publicand private purchasers and their insurers as well as patients). Therecently enacted federal Patient Protection and Affordable Care Act(PPACA) was a direct response to uncontrolled costs but it did notimplement a single-payer system. However it did usher in otheralternatives that involve global payments to hospitals and physicianssuch as Accountable Care Organizations (ACO), Acute Care Episodes (ACE)and Consumer Operated and Oriented Plans (CO-OP). These new deliverysystems allow hospitals and physicians to share net-savings, which holdgreat promise for improving quality and controlling healthcare costsbecause physicians can now participate in the savings they helped createthrough improved clinical outcomes. However, these cost sharingmechanisms will be successful only if quality and efficiencies areaccurately assessed and providers are appropriately reimbursed for theirefforts. Verras' technologies and techniques are unique in theirabilities to assist physicians and hospitals with quality and costefficiency improvements and to translate the changes in practicepatterns to appropriate reimbursements for hospitals and physicians whodeliver high quality, cost efficient healthcare.

Patients want their choice of providers at reasonable prices. Public andprivate purchasers, as well as insurers need to know the value of theservices they receive for their money; and providers need the latitudeto practice their professions unencumbered by third party intrusions.But these ideals have not materialized for any number of reasons, notthe least of which is the misalignment of financial incentives betweenpurchasers, insurers, hospitals and physicians. Currently, for one ofthese groups to financially win, one or more of the others must lose.The effects of misaligned incentives have created a bizarre triad of:excessive profits for insurance and managed care companies that do notdeliver care; insufficient funding for providers who are dedicated andtrained to deliver quality care; and diminished access, coverage andservices for patients who need care. Distrust among all parties andchaos in the system are the unintended consequences of misalignedincentives and the inability to contract for healthcare services on thebasis of objectively defined value, that is, quality and costs.

For these reasons, the alignment of providers' and hospitals' incentivesand their integration into common provider groups are viewed as criticalcomponents of the solution to control medical quality and costs. Tothese ends, numerous care delivery models have been tried but few havemet with anything but marginal success. This invention changes this andsolves the primary, non-political problems relating the quality and costissue facing the United States' healthcare system.

There are a few examples in which physicians, hospitals and theirinsurance entities have aligned their incentives and integratedthemselves to achieve reasonable levels of medical quality, and to someextent, cost efficiencies and patient satisfaction. The first example isa health maintenance organization (HMO) model, such as KaiserPermanente. The second is represented by the Mayo Clinic-type model.Delivery systems of these types can be found in a number of citiesthroughout the country. What is common to both models is theirintegration and alignment of quality and financial incentives of thethree principal components—physicians, hospitals and insurance entities.Their physicians are generally on salary and receive additionalremunerations if the enterprise prospers. However, from a nationalperspective, these models cannot accommodate the majority of US patientswho are treated by independent physicians and hospitals with limitedaccess to integrated provider enterprise's, such as these examples.

Another attempt to align providers' incentives and thereby control costsis a program called “pay-for-performance.” These initiatives involve theinsurer awarding bonuses to physicians for improving a few selectedquality indicators. Pay-for-performance has been a largely unsuccessfulattempt to achieve what this invention has accomplished, which is thealignment of quality and financial incentives for independent hospitals,physicians and insurers through the novel provisioning of clinicalquality improvement and financial information. The key to achieving theinvention's enhanced benefits is transforming the readily availablehospital and insurance information into actionable data for physiciansto create clinical improvements and aggregating the data intotransparent and easily understood measure of quality and efficienciesfor the benefit of all stakeholders. The most recent delivery modelscreated by the aforementioned federal legislation (PPACA) make thisinvention even more valuable than before.

The PPACA legislation implements global budgeting for hospitals andphysicians who will be financially incentivized by Centers for Medicareand Medicaid Services (CMS) for improving the quality and efficienciesof their care. The previously mentioned ACOs, ACEs, and CO-OPs are threeother federally designed delivery systems that are dependent on globalbudgets that will be divided between the hospital and physicians on thebasis of objective measures. The technologies, algorithms and qualityindices of this invention are uniquely designed to provide theobjectively defined, appropriate reimbursements for the hospital andphysician providers.

SUMMARY OF THE INVENTION

The invention's technologies, processes and algorithms facilitate anintegrated, value-based delivery system across the continuum of care(inpatient and outpatient) in which a healthcare insurer or publicagency can financially incentivize providers who will knowledgeablyshare the net savings between the hospital and physician providers whosepractice patterns demonstrate superior performance.

These unique processes utilize risk-adjusted, clinical quality data fromhospitals' medical records departments, hospital Medicare specific data,insurers'routinely aggregated claims data, patients' ambulatory outcomescollected by physicians' offices and other examples, but not limited to,National Hospital Quality Measures and Accountable Care OrganizationMeasures. What is pragmatic and synergistic about the invention is itsability to re-purpose the hospitals', physicians' and insurers'routinely used data, which in and of themselves, are not unique.However, the invention's ability to use these same data for fourcritical functions is unique. First, the invention's processes transformthe routinely used data into actionable, clinical quality improvementdata for physicians. Second, its algorithms quantify the results ofphysicians' practice pattern enhancements, third, the algorithms assignappropriate provider remunerations based on the quality and costefficiency outcomes and fourth, the invention converts these data intoan Index of Quality Improvement that documents a hospital's and medicalstaff's outcomes over time. For the first time, independent physiciansand hospitals will have inpatient, outpatient and insurance data, whichcan be used to improve clinical, financial and patient centered outcomeswhile directly linking their quality improvements to appropriatefinancial rewards. Moreover, employers, patients, public agencies andthe providers themselves will have a transparent and accurate measure ofthe providers' quality and cost efficiencies over time.

Testaments to the uniqueness of this invention are the many literaturereferences to the need for providers and insurers to align theirincentives for quality and cost control purposes; juxtaposed to thenumerous unsuccessful attempts in the marketplace to accomplish thealignment. Using this invention's technologies, processes andalgorithms, providers and insurers will be able to align theirincentives, control costs and deliver transparent, superior qualityoutcomes to the benefit of their patients, themselves and our entire UShealthcare system.

Historically, independent physicians, hospitals and insurers have eachhad their own data, which has been used for their specific andindependent purposes. Prior to this invention, there had never been aprocess for transforming these disparate, but readily available,clinical and financial data into actionable repositories of information.

The current invention incorporates medical knowledge into the processesand algorithms that combine inpatient quality outcomes, ambulatoryquality measures and health insurers' financial data into actionableinformation that hospitals and physicians can use to improve theefficacies and efficiencies of their care. It then quantifies thefinancial net savings that predictably accrue as a result of theproviders' improved medical outcomes. The invention's processes andalgorithms also provide the information necessary for the health insurerto equitably share the net saving with the physicians and hospitals asincentives to continuously improve the quality of their patients' careand control costs. In this manner the providers and insurer align theirquality and financial incentives and create a virtual integrateddelivery system of independent practitioners.

Moreover, this invention facilitates the formation of integrateddelivery systems that can be scaled to every community in the nation,which can maximize the health benefits for our entire society.

One advantage of the present invention is the incorporation of clinicaldecisions, processes and algorithms transform four types of commonlyused data into actionable information with which physicians improveclinical quality and cost efficiencies. (Insurers' claims data, hospitalmedical records data, hospital Medicare-specific quality data andpatients' self-assessed quality outcomes generated from physicians'offices.)

Another advantage is that clinical decisions and processes determinewhich clinical specialties to include in the quality improvementinitiative and the number of physicians in each.

Yet another advantage of the current invention is that clinicaldecisions determine which Major Diagnostic Categories (MDC) andDiagnosis Related Groups (DRG) to assign to which of the clinicalspecialty groups.

Another advantage of the current invention is the ability to useclinical decisions to determine case volumes that constitute adequatenumbers of patients.

Yet another advantage of the current invention is that clinical andadministrative processes determine which patient groups to include inthe initiative and calculations by geography, type of insurance plan,etc.

Still another advantage of the present invention uses clinical decisionsand administrative processes to determine how many and which DRGs toinclude in the RIV computations for financial bonuses.

Another advantage of the current invention is that clinical decisionsdetermine which of the CMS indicators and other clinical indicators areappropriate for quality measurement and remuneration.

Yet another advantage of the current invention is that clinicaldecisions determine what level of hospital's clinical indicatorcompliance should be considered as an acceptable quality level for eachindicator group.

Still another advantage of the current invention uses algorithms tocalculate the net changes in quality indicators, determine the qualitybonus factor, apply the results to the sliding scale and calculate thebonus distribution between physicians and hospital.

Still another advantage of the current invention is that clinicalprocesses are established to determine the improvement percentages thatare attributable to the hospital personnel and those to the physicians.

Another advantage of the current invention is that processes determinewho and how the “improvements” are to be determined for remuneration(Acceptable Indicators or mortality etc.)

Yet another advantage of the current invention is that insurer's dataand administrative processes are used to determine expected inflationrates for Inpatient, Outpatient and Professional components of futureexpenditures to calculate physicians' bonuses for inpatient care.

Another advantage of the current invention is that insurer's data,actuarial process and algorithms calculate overall Per Member Per Month(PMPM) saving over 16 month periods to determine net saving forvalue-sharing among insurer, physicians and hospital. (For allinpatient, outpatient and ambulatory care.)

Still another advantage of the current invention is that clinicaldecisions and administrative processes designed Excel spreadsheetalgorithms that determine bonuses and value-sharing among the threeconstituents (Physicians, hospitals and insurer).

Still another advantage of the current invention is that Algorithmsassess, quantify and summarize the clinical quality and efficiencyimprovements. Insurer's claims data and the invention's calculationsdetermine whether bonuses are awarded based on improvements. (Bonusesdependent on quality being maintained or improved.)

Another advantage of the current invention is that clinical andactuarial processes were established to determine “Claims Paid Dollars”and sliding scales of Claims Paid Dollars used by quality metrics.(Quality measures 1, 2 and 7 use sliding scales.)

A further advantage of the current invention is that clinical processesdetermine “Calculated Net Percentage Change” that constitute“improvement” or declination of quality

Yet another advantage of the present invention is that clinicalprocesses determine “Clinical Indicators (CI) Net Percentage ChangeMultiplier” that should be rewarded for “improvement.”

Another advantage of the present invention is that clinical, actuarialand administrative processes determine who and how computation of“improvements” will be determined at the end of the year.

Still another advantage of the present invention is that clinical andadministrative processes determine which of the paid dollar categoriesfrom the insurer's data should be considered for bonuses (Inpatient,Outpatient, Professional Dollars, etc.?)

Another advantage of the present invention is that clinical decisionsand administrative processes determine the improvements that areattributable to the hospital personnel and those to the physicians todetermine percentage remuneration.

Yet another advantage of the present invention is that clinicalprocesses determine how the decision-support tool arrays data using fourquadrant graphs in order to determine reductions in variation of careprocesses.

Furthermore, another advantage of the current invention is that theclinical and administrative processes determine the technique to be usedfor measuring weight adjusted dollar averages at year's end.

Yet another advantage of the current invention is that clinical decisionand administrative processes determine appropriate “Annual ImprovementPercentage” that determines appropriate “Bonus Percentage.”

Still another advantage of the current invention is that Algorithmscalculate the expected, year-end dollar resource consumptions(expenditures) using insurer's inflation rates (Inpatient 8.7%,Outpatient 5.5%, Professional 6.3%).

Another advantage of the current invention is that clinical decisionsdetermined how to measure Reductions In Variation (RIV) of Charges andLength of Stay (LOS) for selected DRGs. Changes in DepartmentalVariations are measured using a decision-support tool “Sherlock” thatarrays the hospitals' medical records data and computes variations.

Yet another advantage of the current invention is that clinicaldecisions determine if or when to include readmission rates in algorithmfor remuneration.

Still another advantage of the current invention is that administrativedecision processes determine “Bonus Percentage” for each “Level ofIndividual Participation,” that is, physician participation.

Another advantage of the current invention is that clinical,administrative and actuarial processes determine percentage of sharingbetween insurer, hospital, physicians and Verras.

Yet another advantage of the current invention is that actuarial andclinical processes determine dollars that are available for bonuses andvalue-sharing using algorithm based on 3 year averages of insurer's paiddollars for each of the clinical specialties that physicians used toimprove quality and efficiencies.

Furthermore, another advantage of the present invention is thatadministrative and actuarial processes determine a method ofdistributing available dollars if no, or only a portion of value-sharingdollars are available.

Another advantage of the present invention is that administrativeprocesses determine how start-up costs are covered, by whom and withwhich dollars.

A further advantage of the current invention is that algorithmsdetermine bonuses for “inpatient” and “facility outpatient care” as wellas for value-sharing (net-savings) for total resource, utilization,inpatient, facility outpatient, professional fees and ambulatory(office) care.

BRIEF DESCRIPTION OF THE DRAWINGS

The above mentioned and other objects and features of this invention andthe manner of attaining them will become apparent, and the inventionitself will be best understood by reference to the following descriptionof the embodiment of the invention in conjunction with the accompanyingdrawings, wherein:

FIG. 1 depicts a flow chart indicating the flow of, use of anddissemination of hospital data, physician's office data, public (MedPar)data and data from insurance companies;

FIGS. 2A and 2B shows multiple index of quality improvement (IQI)calculations using 6 metrics and depicting 3 year trends of performancescores for 8 hospitals in both graphical (FIG. 2A) and tabular (FIG. 2B)forms;

FIGS. 2C and 2D depicts a 3 year trend of IQI using 7 metrics andillustrating the performance score for a single hospital, here hospitalF, in both graphical (FIG. 2C) and tabular (FIG. 2D) forms;

FIG. 3 illustrates the relationship between the Sherlock computationalmodel and the Watson analytic model, and the flow of information betweenthe two systems;

FIGS. 4A and 4B depict a two-part flow chart indicating the four primarysources of medical data collection, the processing of that data, and theseven quality metrics and the specific Tables which represent theircalculation;

Table 1 represents a spreadsheet showing hospital and physician qualitymeasures, specifically inpatient and outpatient facility paid dollars,and professional paid dollars;

Table 2 represents a spreadsheet showing hospital and physician qualitymeasures, specifically bonus calculations illustrating total paiddollars;

Table 3 represents a spreadsheet showing a spreadsheet depicting valuesharing calculations, specifically projected spending figures;

Table 4 represents a spreadsheet depicting clinical services and numbersof physicians for bonuses;

Table 5 represents spreadsheet total bonus and value sharing summaries,which includes total bonuses, potential value share calculation andbonuses and value sharing, hospital and MDs;

Table 6 represents a spreadsheet showing total MD bonuses by serviceutilizing the present invention and non-hospital MDs;

Table 7 represents a spreadsheet detailing quality category summaries ofhospital and physician measures;

Table 8 represents a spreadsheet continuing with clinical, rate-basedindicators for total bonus, hospital bonus, MD bonuses and bonus per MD;

Table 9 represents a spreadsheet, illustrating breakdown of the totalreductions in variation detailed according to service;

Table 10 represents a spreadsheet showing changes in resourcesconsumption, financial by service (Service 1: Cardiopulmonary, Service2: neurosurgery, Service 3: Neurology, Service 4: Orthopedics, Service5: OB/GYN) for inpatient and outpatient breakdowns culminating in totalbonuses for inpatient and outpatient figures for both Hospital bonus andMD bonus;

Table 11 represents a spreadsheet which depicts quality categorysummaries of physician measures indicating total bonus dollars perservice (service 1: cardiopulmonary, service 2: Neurosurgery, service 3:neurology, service 4: orthopedic surgery and service 5: OB/GYN)

Table 12 represents a spreadsheet demonstrating the use of computerizedpatient health record (PHR) with a total sum and average bonus per MD;

Table 13 represents a spreadsheet depicting the total of all bonuses;

Table 14 represents a spreadsheet showing details the hospital andphysician quality measures, more specifically, the CMS (Medicare)clinical indicators, hospital bonus, MD bonuses and bonus per MD;

Table 15 represents a spreadsheet focusing on the formula used todetermine clinical, rate-based indicators;

Table 16 represents a spreadsheet illustrating the formulae used todetermine the hospital bonus (25%), MD Bonuses (75%), and the averagebonus per MD according to the present invention;

Table 17 represents a spreadsheet depicting an example of acardiopulmonary inpatient using a weighted average based on the percentimprovement of the per case, weighted adjusted resource consumption;

Table 18 represents a spreadsheet showing an example of a neurosurgeryinpatient, using a weighted average to determine resource consumption,total bonus, hospital bonus, MD bonuses and bonus per MD;

Table 19 represents a spreadsheet demonstrating an example of aneurology patient using a weighted average for calculating hospitalbonus, MD bonuses and bonus per MD;

Table 20 represents a spreadsheet illustrating an orthopedics inpatientusing a weighted average to calculate hospital bonus, MD bonuses andbonus per MD;

Table 21 represents a spreadsheet demonstrating the use of weightedaverage in calculating the hospital bonus, MD bonuses and bonus MD in anOB/GYN inpatient;

Table 22 represents a spreadsheet used to calculate the expected cost in2007, the weighted average in 2007, the annual improvement ordegradation and the annual improvement percent bonus;

Table 23 represents a spreadsheet showing the calculation of theexpected cost for a cardiopulmonary outpatient utilizing a weightedaverage to calculate the total bonus, hospital bonus, MD bonuses andbonus per MD;

Table 24 represents a spreadsheet for a neurosurgery outpatientutilizing weighted averages and expected cost to calculate total bonus,hospital bonus, MD bonuses, and bonus per MD;

Table 25 represents a spreadsheet illustrating the use of a weightedaverage, and formula to establish total bonus, hospital bonus, MDbonuses and bonus per MD for a neurology outpatient;

Table 26 represents a spreadsheet calculation of total bonus, hospitalbonus, MD bonuses and bonus per MD utilizing weighted averages for anorthopedics outpatient;

Table 27 represents a spreadsheet demonstrating the use of weightedaverages in the calculation of OB/GYN, outpatient service 5, todetermine total resource consumption, hospital bonus, MD bonuses andbonus per MD;

Table 28 represents a spreadsheet for another outpatient, not includedin bonused services, utilizing weighted averages to determine expectedcost, weighted average cost, annual improvement/degradation and annualimprovement %;

Table 29 represents a spreadsheet which illustrates how to determinephysician quality measures utilizing clinical pathway development anduse;

Table 30 represents a spreadsheet demonstrating the current annual paiddollars and formula to determine MD bonuses for clinical pathways,service 2, neurosurgery, total bonuses;

Table 31 represents a spreadsheet showing the formula used to determineclinical pathways (services 3-neurology) total bonus;

Table 32 represents a spreadsheet demonstrating the formula used tocalculate total bonus for clinical pathways (service 4—orthopedics)total bonus;

Table 33 represents the spreadsheet showing the use of the formula todetermine the total bonus for clinical pathways (service 5—OB/GYN); and

Table 34 represents a spreadsheet showing the use of an electronichealth record (EHR) in determining the individual physicians with 10%patient use of to determine the total bonus and the average bonus perMD.

DETAILED DESCRIPTION OF THE PREFERRED EMBODIMENT

The accompanying drawings, which are incorporated in and form a part ofthis specification, illustrate embodiments of the invention and togetherwith the description, serve to explain the principals of this invention.

Referring now to the drawings, wherein similar parts are identified bylike reference numerals, FIG. 1 shows a flow chart of data leading tothe calculation of an IQI, and the pathways of use of that IQI. Data isoriginally sourced from hospital records, public data like MedPar,insurance companies and physician's offices. The data is fed to AIMtechnology algorithms and sent to Sherlock for conversion into hospitallevel data. Data from Sherlock also is sent to a Chart Abstraction Tool(CAT) and Watson knowledge system for transference into MD and patientlevel data. Both hospital level data and MD and patient level data aresent to a physician directed best practices knowledge base, and used inmetric calculations. High quality efficiency outcomes lead to 7 or moremetrics available for use in calculating an IQI. In FIG. 1, 7 metricsare shown: 1. National Hospital Quality Measures (NHQM); 2. PatientSatisfaction; 3. Mortality; 4. Morbidity; 5. reductions in variation(RIV); 6. Resource consumption; and 7. Accountable Care Measures(ACO.M), ambulatory outcomes (AMB.O) from outpatient MD offices. One ormore additional factors, represented by metric 8 can also be used in thecalculation of IQI. Once an IQI is determined, it is sent to publicagencies, consumer, employers and optionally CO-Ops, and optionally maybe sent back to the physician directed best practices knowledge base.CO-Ops may use the IQI information through their CO-OP Board anddisseminated to employers/consumers, board MDs and hospital personnel.Therefore, as illustrated in FIG. 1 the present invention is a systemfor healthcare performance measurement and equitable providerreimbursement comprising the elements of: (a) gather medical informationfrom hospital patients charts data, hospital medical records departmentdata, insurance company data, and physician's office data; (b) aggregatethe gathered data and calculating the following quality metrics:National Hospital Quality Measures (NHQM) mandated by Centers forMedicare and Medicaid Services (CMS), patient satisfaction, morbidity,mortality, reduction in variation, resource consumption; (c) calculatean index of quality improvement (IQI) for each healthcare provider; (d)generate value sharing computations and calculate overall net savings;and (e) distribute said net savings to physicians, hospitals, CO-OPs andinsurers in the form of reimbursements.

FIGS. 2A and 2B shows multiple index of quality improvement (IQI)calculations depicting 3 year trends of performance scores for 8hospitals in both graphical (FIG. 2A) and tabular (FIG. 2B) forms. TheIQI is calculated using the six enumerated metrics and ambulatoryoutcomes and Accountable Care Organization (ACO) metrics from outpatientand physician's offices as a seventh metric added to the IQIcalculation. IQI may be tracked for one or more healthcare providers andfor one or more years, with resulting IQI performance trend informationsent to employers, consumers, public agencies, CO-OPs and hospitalpersonnel for the purpose of making decisions regarding healthcareprovider performance and improvement.

FIGS. 2C and 2D depicts a 3 year trend of 7 performance score for asingle hospital, here hospital F, in both graphical (FIG. 2C) andtabular (FIG. 2D) forms. Quality assurance and equitable reimbursementsystem (QAERS) algorithms are employed to generate value sharingcomputations and calculate overall net savings, wherein said valuesharing computations and calculate overall net savings are used tocalculate reimbursement rewards to be distributed to hospitals, clinicalpractice groups and physicians.

FIG. 3 illustrates the characteristics of and relationships betweenSherlock and Watson, and in particular is illustrates the data flowbetween the two systems. AIM technology algorithms (as seen in FIG. 1)are employed to aggregate data gathered from medical information fromhospital patients charts data, hospital medical records department data,insurance company data, and physician's office data, prior to providingthe resulting information to a Sherlock sub-system. Sherlock sub-systemaggregated data is further analyzed by a Watson sub-system whichexplains diagnoses and procedures by who, what and why, sequence ofevents and what was not documented, explains specific resources byspecific type of tests, breakdown of drugs, identifies why extra dayswere spent in hospital, and converts to true costs, and create a bestpractices framework by database of clinical variation by diagnosis andprocedure, establishes a computerized physician order entry (CPOE)customization and facilitates clinical pathway construction. At therevenue code level—every billed item in a hospital has a revenue code.For example a Chest X-ray is 320. Sherlock has the capability of tellingus that during a specific hospital stay, there were 10 chest rays usingthese codes. However, the revenue code level cannot tell you thespecific type of chest X-ray nor when it was ordered and who ordered it.Watson's Chart Audit tools use the Revenue Codes targeted by Sherlock todiscovery the basis of why, who, when these order were written. CPOE isshort for Computerized Physician Order Entry. Now that all hospitals aremoving toward the Electronic Health Record (EHR or EMR), a physicianmust bring up a screen and decide what orders are required rather thanjust pull the chart and write them out. In order to expedite thisprocess, templates are built by diagnosis to list the most appropriateor likely test based on diagnosis. Watson will use a physician's actualorder history, pull out their best practices and customize thesetemplates. The value here is that by customizing (shortening) this listit improves compliance with the CPOE and hopefully stops the physicianfrom over-ordering.

FIG. 4A shows a flow chart of data as it is generated by hospitalmedical records, physician's office and insurer reimbursement (paid) asthe data are identified as patient risk-adjustment, patientself-assessed outcomes, aggregated insurer data.

The data is submitted for physician and hospital quality improvementactivities, ambulatory quality improvement activities and inpatientcharges outpatient charges professional charges and overall PMPM data.The congregate of data is then submitted for processes for assessment ofquality outcomes and cost efficiency improvements in FIG. 4B. It isanticipated that IQI may be calculated using other metrics as theybecome recognized national standards for measuring quality assurance andefficient performance of healthcare providers. Additionally, said methodmay include the step of ranking quality metrics as to importance forquality and financial incentives, prior to said step of calculating anindex of quality improvement (IQI) for each healthcare provider.

The data is then processed for decisions, that is, which quality metricsfor bonuses and which for value-sharing, ranking quality metrics as toimportance for quality and financial incentives and how to quantifyimprovements.

The decisions for rational distributions of bonuses for inpatient careand value-sharing for overall quality and cost efficiencies are next andfinally, algorithm construction to appropriately distribute net savingsto physicians, hospitals and insurer.

Background

Verras Medical, Inc. has provided health care services to hospitals andtheir medical staffs for the past 24 years. The company's uniqueservices consist, in part, of reformatting risk-adjusted hospital datausing a proprietary decision-support tool, Sherlock, and demonstratingthe clinical quality variations in physicians' practice patterns. Usingthese data and its proven clinical process improvement techniques,Verras is able to assist physicians in their efforts to demonstrablyimprove the outcomes of care for their hospitalized patients. Someprogressive hospitals and their medical staffs have taken theseadditional efforts for purely quality improvement reasons. However,these initiatives are not widespread as they require additional time andexpenditures. Many policy makers now believe that physicians andhospitals who objectively improve their quality and efficiencyperformances should benefit from the same financial incentives enjoyedby virtually every other market. Financial incentives are the primaryreason that the majority of American industries have outpaced healthcarein terms of continuously improving the quality and efficiencies of theproducts and services they offer.

The Fundamental Problem

During the late 1980's and early 1990's, private and public healthcarepurchasers sought relief from escalating medical costs through managedcare entities. These third parties implemented stringent price controlsthat were predictably effective, but only for a short time. After thefirst wave of managed care, a patient backlash is now underway becausethird parties have no allegiance to the patient-physician relationshipand patients are more interested in access to their physicians than intheir employers' or Medicare's cost savings. Patients need their choiceof providers; purchasers need to know the value of the services forwhich they are paying large sums of money and providers need thelatitude to practice their professions without micro-managementencumbrances by third parties. But these ideals have not materialized.Now, for insurers, purchasers and policy makers are looking around andasking, “what's next,” there is a solution created by Verras MedicalInc. for a hospital and not-for-profit Insurer in a western state. It isimperative that the Insurer be not-for-profit because providers wouldknow that any efficiency created by their practice pattern changes wouldnot accrue to their benefit as it would in other industries. The netprofits would first go into the pockets of the investors as it has inthe past.

The Current Marketplace as a Guide to the Future

There are two integrated healthcare delivery systems that have stood thetest of time and are well recognized for their efficiencies. The firstis a Health Maintenance Organization (HMO), Kaiser Permanente. Thesecond model is the Mayo Clinic-type systems, which are integratedhealthcare delivery systems. Such integrated systems can be found in afew cities throughout the country. The structural component that iscommon to both of these systems is their integration of the threecomponents—physicians, hospitals and insurance entities. In thesesystems, all stakeholders have the same quality and financialincentives. If one constituent improves its quality and efficiencies,the other two parties also benefit. In these models the physicians areon salary, thus obviating the need to precisely measure the quality orcost efficiencies of individual doctors or the specific hospitals orclinics in which they practice. All receive bonuses if the enterpriseprospers.

However, the vast majority of patients in the US are treated byindependent physicians and hospitals. Based on the experiences of thetwo previously mentioned models, the need to integrate independenthospitals and medical staffs into provider enterprises with similarquality and financial incentives has long been recognized. Without thehospitals being on the same charge master and physicians on the samepayroll, there has been no means of quantifying the quality and costefficiencies of each of the component parts and differentially rewardingthem. Without integrating the disparate data used by these entities andthe Insurers with whom they contract, there has been no means ofcompensating the providers according to their respective quality andefficiency performances. This has led many to speculate that the onlyway of creating the necessary integration of these divergentconstituencies is to devolve to a single-payer, nationalized system.This must not be the nation's only option.

The Solution

There is a more American-like solution made possible by the Verrasalgorithms in the form of an integrated, value-based system comprised ofindependent physicians and hospitals in which the quality and economicincentives of the insurer, hospital and physicians are all aligned.

The solution for an effective American healthcare system should befounded on rational, free market forces where public and privatepurchasers contract with properly incentivized providers for servicesusing established measures of quality and price. When purchasers, theirinsurers and patients have reliable information with which they canknowledgeably reward providers who demonstrate superior performance,then effective and efficient healthcare will be the norm. What has beenunavailable until now are the means to appropriately incentivizehospitals, insurers and physicians on the basis of objective clinicaldata improvements and create a virtual integrated delivery system ofindependent providers and insurers. This requires algorithms thatcombine physicians' clinical process improvement data, ambulatoryoutcomes, hospital quality data and insurers' financial data. Withoutthese algorithms and processes, an integrated, private fee-for-servicemodel that aligns all stakeholders' incentives is not possible.Moreover, the delivery system must be scalable to every community in thenation for maximum societal benefits.

The Role for Verras' Processes and Algorithms Using New Technologies

Inpatient clinical systems and new Internet-based outpatienttechnologies are now available to monitor all aspects of medical qualityand assist doctors as they strive to optimize medical outcomes and theappropriate use of resources. However, testaments to the fact that suchtechnologies are not being effectively utilized are the wide variationsin diagnostic and treatment options physicians deploy for comparableclinical conditions. These variations have persisted for years in spiteof reams of medical, evidence-based literature. Without the means to usethese data sources to appropriately align provider's incentives so theywill modify their practice patterns, these quality variations andinefficiencies will persist unabated.

In order to document that hospital care is significantly improvingpatients' health, it is as important to measure patients' post-dischargelongitudinal health and functional metrics as their inpatient outcomes.This continuous quality-monitoring feature is unique to the initiativethat has been used to develop the Verras processes and algorithms. It ismade possible by new Internet technologies that use patient-centric,office medical records techniques. These electronic health records(EHRs) can facilitate patient-physician collaboration by enablingpatients to assist physicians in creating their medical office records.This function is a major time and cost savings for doctors, which is whythey will adopt them. Moreover, physicians have condition-specific,evidence-based information at hand exactly when they need it, which iswhen they're with the patient. Patients' education is also facilitatedthrough condition-specific information that is chosen by the doctor andavailable on the patient's electronic chart in the physician's officerecord. The outputs of this system are a significant part of thealgorithms for assessing and rewarding outpatient metrics of quality.These outcomes are patients' longitudinal health and functional statusthat can now be monitored using SF-36s and condition-specific functionalquestionnaires that are available for analysis every 6 months. These aremetrics necessary for quality improvement and doctors' qualityreimbursements.

Technologies such as these facilitate the shift toward a consumer-drivenhealthcare system. The time has come for patients (consumers) toparticipate in the medical decision-making process and Verras algorithmsfacilitate payments for physicians who interact with their patients toimprove patients' satisfaction and clinical outcomes.

A Unique Approach and a Model for the Nation

The promise of an integrated, value-based, market-driven healthcaredelivery system comprised of independent physicians, hospitals andinsurers has not materialized to date for a number of reasons, not theleast of which has been the inability to quantify the quality andefficiencies of these three constituents. There has also been thepaucity of patients' ambulatory health outcomes information that has ledto the recent emphasis on trying to gets providers to adopttransportable, electronic health records. These impediments no longerexist because of Internet technology and risk-adjustment technologiescritical to the assessment of clinical quality. The only missing elementis to align the incentives of independent physicians, hospitals andnon-profit insurers and appropriate reward each stakeholder inaccordance to their contributions to the enterprises' overall qualityand cost efficiency improvements. This is now possible using Verras'clinical improvement technologies and processes that have createdalgorithms to define and measure each metric of quality and associatedefficiencies.

These processes algorithms represent a significant step toward thevalue-based delivery goal by defining and quantifying the contributionsof each constituent when inpatient and outpatient outcomes are improved.The algorithms allow for the rewarding of providers' performances onstandard quality and efficiency outcomes, but also in three novel ways.

-   -   1. They reward providers who measure and control variations in        hospital clinical processes and outcomes. (Uncontrolled        variations are well documented sources of dis-quality and        inefficiencies.)    -   2. They recognize patients' satisfaction as an important quality        metric and propose to reward physicians on this self-assessed        outcome over time using an EHR.    -   3. The algorithms reward physicians who monitor and improve        patients' health and functional outcomes in the ambulatory        sector, including medical offices using a transportable        electronic health record (EHR).

The alignment and equitable remuneration of physicians', hospitals' andnot-for-profit insurance companies' incentives will create provider“teams” that can successfully collaborate and implement value-basedelivery systems. There are no political or structural changes at thenational level that could be more valuable to the future viability ofMedicare and our private, healthcare delivery system than to implementand expand quality-based models such as are possible using theseprocesses and algorithms. Initiatives such as this will be made possiblewhen insurers and providers integrate and utilize these algorithms toappropriately reimburse the highest quality, most cost efficientphysicians and hospitals. When the Verras algorithms are used toproperly incentivize and reimburse providers, it is no exaggeration tostate that this will be the most comprehensive inpatient and outpatientquality and cost efficiency effort ever implemented by the privatehealthcare sector.

Verras' Technologies that Support the Verras Process

Sherlock and Watson Descriptions:

Verras has spent the past four years developing the processes necessaryto create algorithms that define and quantify clinical quality and costefficiency improvements for the purpose of appropriately rewardingproviders. These unique processes utilize risk-adjusted clinical qualitydata from hospitals' Uniform Hospital Discharge Data (UHDDS) incombination with insurers' routinely aggregated claims data andpatients' self-assessed, ambulatory outcomes (Health Status, FunctionalStatus and Patient Satisfaction). The risk-adjusted clinical hospitaldata, the insurer's claims data and the self-assessed outcomes data, inand of themselves, are not unique. However, the processes that transformthese data into actionable information in the hands of motivatedproviders and the algorithms that calculate and collate the results oftheir practice pattern enhancements into appropriate providerremunerations are unique. For the first time, physicians and hospitalswill have inpatient, outpatient and insurance data they can use toimprove their clinical and patient centered processes and outcomes andhave their improvements be directly correlated with appropriatefinancial rewards.

Without the novel means provided by Verras' processes and algorithmsthat combine and objectively quantify the quality and cost efficiencymetrics that are attributable to each of the three constituencies,(hospital, physician and insurance company), an integrated, value-basedsystem for independent physicians and hospitals is not possible. Thesealgorithms provide a new and effective means to objectively align theincentives of physicians, hospitals and Insurers and appropriatelyreward those who improve clinical quality and cost efficiencies.

Each portion of this detail description of the preferred embodiment ofthe invention in the present application is divided into;

1. Data sources

2. Processes and decisions necessary to design the algorithms

3. Algorithms

The Verras Algorithms are designed to:

-   -   1. Measure numerous types of quality improvements and    -   2. Compute and reward providers' resource consumption        efficiencies based on the results of the quality improvements;        in Quality Assurance Equitable Reimbursement Systems (QAERS), if        quality is not maintained or improved, there are no bonuses.    -   3. To be specific to each data source and quality indicator

Two Types of Financial Incentives for Providers:

-   -   I. Bonuses—Bonuses are rewarded for inpatient care only.    -   II. Value-sharing—Value-sharing is computed on inpatient,        facility outpatient and ambulatory outpatient (medical office)        care.

I. Bonus calculations are calculated by each of five clinical services:cardiopulmonary, neurosurgery, neurology, orthopedics and obstetrics.(Inpatient inflation rates are experiential at 8.5%, Outpatient—5.5% andProfessional 6.3%.)

II. Value-sharing calculations are for the physicians in the 5 clinicalservices plus all physicians using the electronic health record (EHR)and are based on the physicians being able to off-set their historic7.1% inflation rate with efficiencies that create a 0.01% inflation ratein year one. (The Insurer's experiential PMPM inflation rate is 7.1%).

I. BONUS CALCULATIONS by Quality Metrics: 1-7—(References are by TableNumbers to the Accompanying Tables found on drawing sheets). RegionalMedical Center (RMC) and Health Center North (HCN) are used as twoExample hospitals.

1. MEDICARE, MEDICAID (CMS) & JCAHO—Quality Metric 1

(see Table 7 and Table 14 on drawing sheets)

Data Source

Hospital staff personnel manually abstract Medicare (CMS) defined datafrom patients' charts. (Example—Time from admission to receivingantibiotics.) These data are aggregated by Verras, or other CMS Vendor,and submitted to CMS and JCAHO. (These “data source” steps are not apart of the Verras patent applications. They are processes all hospitaluse that prepare the data used by QAERS).

Verras Process:

The process of preparing the data for use by Verras Algorithms is todetermine:

-   -   1. Which clinical specialties to include in the quality        improvement initiative and the number of physicians in each        group. Decisions based on case volume, total resources of the        clinical service and the interest in participation by each        physician. (Should all physicians on the staff be included?        Should primary care physicians be included? Should hospitalists        be included, if so, with cardiopulmonary group or in their own        group?)    -   2. Which Major Diagnostic Categories (MDC) and Diagnosis Related        Groups to assign to which of the clinical specialty groups.        ((Examples are Major Diagnosis Group (MDC) 4 (Pulmonary) and MDC        5 (Cardiac) are place into one clinical group in the example        hospital to form the Cardiopulmonary Group.))    -   3. Which of the CMS indicators are appropriate for use for        quality measurement given the choices of clinical specialties?        (There are 5 categories of Medicare Indicators but in the        example hospital only 4 are submitted to CMS. Should all be        included?)    -   4. Determine which patient groups to include in the initiative        and calculations by geography, type of insurance plan etc.        (Which counties of the state should be included, should        catastrophic cases (>530,000/case) be included? Which patients        for which type of insurance coverage should be included? Should        self-insured employer's patient be included?)    -   5. Confer with insurer as to which dollars will be in the bonus        pool. Should it be costs, charges or paid dollars?    -   6. What level of hospital's indicator compliance should be        considered as an acceptable quality level for each indicator        group?    -   7. How and who determines acceptable compliance at the end of        the year?    -   8. Determine the improvement percentages that are attributable        to the hospital personnel and those to the physicians. Bonus        sharing should be determined by level of expertise and effort,        such as should the sharing be 50/50 between hospital and        physicians?    -   9. Collaborate with insurer to determine expected inflation        rates for Inpatient, Outpatient and Professional components of        the costs. (Five years of historic data should be used to        determine inflation rates.)    -   10. Determine which of the paid dollar categories from the        insurer's data should be considered for bonuses (Inpatient,        Outpatient, Professional Dollars, etc.?)    -   11. Determine bonus percentages and sliding scale of Claims Paid        Dollars    -   12. Determine monitoring and reporting cycles. (Every quarter, 6        months, 1 year?)    -   13. Determine how the results of the quality indicator will be        reported to hospital staff and physicians.    -   14. Determine if one or both hospitals' indicators should be        used, if so determine clinical reasoning for decision.    -   15. Determine the relative impact on overall inpatient quality        that the CMS indicators impart compared to other medical        indicators in order to build the algorithms appropriately.    -   16. Determine if physicians should get a bonus for quality        improvements on a flat rate of dollars, or should they get        increased bonuses if they maintain or improve quality based on        percentages of total dollars to also reward cost efficiencies        based on a sliding scale. If so, design the sliding scale and        create a means to change the ranges on the scale if dollars are        higher or lower than expected.    -   17. Design Excel Spreadsheet algorithms to determine bonuses and        value-sharing.

Verras Algorithms:

Hospital-Specific Centers for Medicare and Medicaid Services (CMS) andJCAHO Core Measures—[Annual Monitoring and Reporting]

Bonus from Insurer:

-   -   1. Measurement: All Regional Medical Center (RMC) business (all        commercial and Medicare), all MDCs, all services for Facility        Inpatient and Facility Outpatient.    -   2. Bonus Criteria: Bonuses are predicated on these quality        metrics being maintained at an acceptable level as determined by        JCAHO/CMS, or improved. Potential bonuses for 4 standard CMS        groupings, containing 23 specific indicators that are hospital        specific and in keeping with these agencies quality indicators        (Appendix A)    -   3. Bonus received for each of 4 criteria at 70% level.    -   4. Bonuses: Calculated based on insurer total claims paid        dollars: Inpatient Facility and Outpatient Facility paid dollars        only, all MDCs, all services for participating groups only, for        members with addresses in the six county area: Jackson, Lake,        Jefferson, Lincoln, Toole and Tyler.    -   5. Bonus percentage: An increasing bonus percentage is applied        as total paid dollars decrease to reward physicians'        efficiencies in resource consumption.    -   6. Verras measures, computes results and reports data at the end        of year-one.

IN-TEXT TABLE 1A Actual Total Claims Paid Dollars Bonus PercentageInpatient and Outpatient Facility 0.000% Greater than $6,500,000 0.030%$6,400,000 to $6,500,000 0.035% $6,300,000 to $6,399,999 0.040%$6,200,000 to $6,299,999 0.045% $6,100,000 to $6,199,999 0.050%$6,000,000 to $6,099,999 0.055% $5,900,000 to $5,999,999 0.060%$5,800,000 to $5,899,999 0.065% $5,700,000 to $5,799,999 0.070%$5,600,000 to $5,699,999 0.075% $5,500,000 to $5,599,999 0.080% Lessthan $5,500,000

Bonus Distribution: 25% Hospital and 75% MDs

Formula for Bonus:

-   -   A. Actual Total Claims Paid Dollars multiplied by corresponding        Bonus Percentage (using in-text Table 1A above)=single group        bonus    -   B. Single group bonus multiplied by number of compliant groups        (Maximum of 4)=Total Bonus paid to hospital and physicians    -   Example of 4 compliant groups    -   $5,500,000×0.075%=$4,125×4=$16,500 Bonus to Hospital & MDs        -   Hospital Bonus (25%)—$4,125        -   MD Bonus (75%—$12,375        -   Bonus per MD (No. 24)—$516

2. CLINICAL RATE-BASED INDICATORS—Quality Metric 2

(see Table 8 and Table 0.15 on drawing sheets)

Data Source

Uniform Hospital Discharge Data Set (UH DDS)—routinely and automaticallygathered by hospitals' medical records departments.

(These “data source” steps are not a part of the Verras patentapplications. They are processes all hospital use.)

However, the process that Sherlock uses to aggregate the rate-basedindicator data in preparation for use by QAERS is a part of this patentbecause it reformats data in a way that is new.

-   -   Verras Process to Facilitate Providers Improving their quality        and cost efficiency outcomes.

Sherlock Watson

Verras Process to Create QAER Algorithms:

The process of preparing the data for use by Verras Algorithms is:

-   -   Verras computes the rate based indicators and formats the data        for use by clinicians. (Example—Rates of caesarian sections for        the past 3 years.)    -   2. Determine how to determine the clinical significant for        presentation to physicians. (Use 2 standard deviation error bars        to demonstrate statistical significance. Determine format for        data presented to physicians using Verras decision support tool        “Sherlock”.)    -   3. Determine if calculated should be based on insurer total        claims paid dollars: Inpatient Facility and Outpatient facility        only? Whether on all MDCs? All services for participating groups        only? Should members with addresses in the six county area be        used or should all patients be included?    -   4. Determine the monitoring cycle and reporting cycle.    -   5. Determine the relative impact on overall inpatient quality        that the CMS indicators impart compared to other medical        indicators in order to build the algorithms appropriately.    -   6. Determine which of the indicators are appropriate for        inclusion in the algorithms for reimbursement    -   7. Determine which indicators are appropriate for presentation        to which clinical specialties.    -   8. Determine who and how computation of “improvements” will be        determined at the end of the year.    -   9. Determine the improvement percentages that are attributable        to the hospital personnel and those to the physicians. Bonus        sharing should be determined by level of expertise and effort,        such as should the sharing be 50/50 between hospital and        physicians?    -   10. Determine which of the paid dollar categories from the        insurer's data should be considered for bonuses (Inpatient,        Outpatient, Professional Dollars, etc.?)    -   11. Determine the algorithm to determine if improvements or        quality compromises are present.    -   12. Determine “Calculated Net Percentage Change” that constitute        “improvement” or declination of quality    -   13. Determine “CI Net Percentage Change Multiplier” that should        be rewarded for “improvement”.    -   14. Determine the sliding scale: Bonus Percentage and Actual        Total Claims Paid Dollars—Inpatient and Outpatient Facility    -   15. Determine the improvements that are attributable to the        hospital personnel and those to the physicians to determine        percentage remuneration.    -   16. Determine if physicians should be bonus for quality        improvements on a flat rate of dollars, or should they get        increased bonuses if the maintain or improve quality based on a        percentages of total dollars to also reward cost efficiencies        based on a sliding scale. If so, design the sliding scale and        create a means to change the ranges on the scale if dollars are        higher or lower than expected.    -   17. Design Excel Spreadsheet algorithms to determine bonuses and        value-sharing.

Verras Algorithms:

Clinical, Rate-Based Indicators (CI)—38 Required: Annual

Monitoring and Reporting

For Clinical Indicators increments of bonuses, the dollars are tied tothe model. The bonuses are incrementally divided by $100,000improvements. Those dollar amounts will be changed depending on theactual value calculated by the model at the end of the year.

Bonus from Insurer:

-   -   1. Measurement: All RMC business (commercial and Medicare) all        MDCs, all services for Facility Inpatient and Facility        Outpatient.    -   2. Bonus Criteria: Bonuses are predicated on these quality        metrics being maintained at an acceptable level or improved as        determined by the ratio of improved or stable numbers of        clinical indicators and those that were degraded. (CIs selected        are 38 standard rate-based, quality indicators that will be        expanded over time. (see Appendix B).    -   3. Bonuses: Calculated based on insurer total claims paid        dollars: Inpatient Facility and Outpatient facility only, all        MDCs, all services for participating groups only, for members        with addresses in the six county area: Jackson, Lake, Jefferson,        Lincoln, Toole and Tyler.    -   4. Bonus Percentage: The net improvement in Clinical Indicators        must be unchanged or improved for providers to receive bonuses        for outcomes improvements.    -   5. CI Net Percentage Change Multiplier determines reward levels        for quality improvements.    -   6. Verras measures, computes results and reports CI data at the        end of each year.

IN-TEXT TABLE 2A Calculated Net Percentage CI Net Percentage ChangeChange Multiplier   0%-4.9% 100.00%  5%-20% 200.00% 21%-34% 300.00% 35%or higher 400.00%

IN-TEXT TABLE 2B Actual Total Claims Paid Dollars- Bonus PercentageInpatient and Outpatient Facility  0.00% Greater than $6,500,000 0.030%$6,400,000-$6,500,000 0.035% $6,300,000-$$6,399,999 0.040%$6,200,000-$6,299,999 0.045% $6,100,000-$6,199,999 0.050%$6,000,000-$$6,099,999 0.055% $5,900,000-$5,999,999 0.060%$5,800,000-$5,899,999 0.065% $5,700,000-$5,799,999 0.070%$5,600,000-$5,699,999 0.075% $5,500,000-$5,599,999 0.080% Less than$5,500,000

Bonus Distribution: 25% Hospital and 75% MD's

Formula for Bonus:

-   -   A. Determine the net change in numbers of Clinical Indicators        (CIs): (Number of CI unchanged or improved minus Number of Cl        degraded=Net change in CIs.)    -   B. Compute the Percentage of Net Change (must be positive for        bonus) (Net Change in CIs divided by total number of Cl's equals        Net Percentage Change in CI)    -   C. Determine Net Percentage Change Multiplier based on the        Calculated Net Percentage Change (see In-text Table 2A)    -   D. Determine Bonus Percentage using the Actual Total Claims Paid        Dollars (Table 2B).    -   E. Compute Base CI Bonus by multiplying the corresponding Bonus        Percentage by Claims Paid Dollars    -   F. Compute Total Bonus by multiplying Base CI bonus by Net        Percentage Change Multiplier

Example:

-   -   22 (CIs Unchanged/Improved)—14 (CI Degraded)=8 Net Change    -   8 (Net Change)/36 (Total)=22% Net Percentage Change        -   Net Percentage Change Multiplier=300% (see In-text Table 2A)    -   $5,500,000×0.075%=$4,125 Base CI Bonus×300%=$12,375 Total Bonus        for Hospital and MDs        -   Hospital Bonus (25%)—$9,281        -   MD Bonus (75%—$3,094        -   Bonus per MD (24)—$387

3. REDUCTIONS IN VARIATION—Quality Metric 3

(see Table 9 and Table 16 on drawing sheets)

Data Source

Uniform Hospital Discharge Data Set (UHDDS)—routinely and automaticallygathered by hospitals' medical records departments.

The process that Sherlock uses to aggregate and reformat therisk-adjusted data in preparation for use by QAERS is not a part of thispatent. Sherlock reformats data used to assist physicians with theVerras' clinical process improvement (CPI) techniques. These techniquesare the means clinicians use to reduce variation in their resourceconsumption (charges) and length of stay (LOS) outcomes to improve bothquality and cost efficiencies over time.

Verras Process:

Decision support tool “Sherlock” arrays risk-adjusted data using fourquadrant graphs.

-   -   1. Sherlock uses the risk-adjusted data (APR-DRGs or Yale-DRGs,        compares the outcomes of each acuity level against the        hospital's self norm and arrays the data on a four quadrant        graph. (See Exhibit A—APR-DRG 194 example)    -   2. Measure Reductions In Variation (RIV) of Charges and        LOS—(Change in Departmental Variation) are measured using        Sherlock, Computes variations using Hospital Charges and LOS and        presents data to physicians using 2 standard deviation ovals and        one to three years of data by DRG specific data.    -   3. Verras physician and hospital quality personnel present data        to physicians to implement Continuous Quality Improvement        activities (CQI)    -   4. Determine the relative impact on overall inpatient quality        that the Reduction In Variation (RIV) imparts compared to other        medical indicators in order to build the algorithms        appropriately.    -   5. Determine case volumes that constitute adequate numbers of        patients    -   6. Determine adjustment percentage of paid dollars to be used        and if it should be the same or different for each clinical        service.    -   7. Determine if caps are necessary on total bonuses.    -   8. Determine how many and which DRGs to include in the RIV        computations for financial bonuses.    -   9. Determine inpatient and/or outpatient dollars to be used in        computations    -   10. Determine who and how the “improvements” are to be        determined for remuneration.    -   11. Determine the improvements that are attributable to the        hospital personnel and those to the physicians.    -   12. Design and create Excel Spreadsheet algorithms to determine        bonuses and value-sharing

Verras Algorithms

Bonus from Insurer:

-   -   1. Measurement: All RMC business (commercial and Medicare)—RIV        of top 5 DRG's per service (top 5 DRGs identified by largest        number of hospital charges, as used for UB-92 submission)—5        clinical services (Cardiopulmonary, Neurosurgery, Neurology,        Orthopedics, OB/GYN) (facility inpatient only).    -   2. Bonus Criteria: Bonuses for Reductions In Variation (RIV) are        awarded only for charges, not LOS, though both are measured for        quality improvements. (LOS and charges are associated) Each        service's net DRG variations in top 5 DRGs, in which the case        volumes are 20 or greater, must be unchanged or improved to        receive bonus.    -   3. Bonus: Calculated based on insurer claims paid dollars:        Inpatient hospital paid dollars only and calculated individually        for each clinical service. (Cardiopulmonary, Neurosurgery,        Neurology, Orthopedics, OB/GYN). Participating groups only, and        only for members with addresses in the six county area: Jackson,        Lake, Jefferson, Lincoln, Toole and Tyler. Time period is dates        Of service Jan. 1, 2007-Dec. 31, 2007 for year one.    -   4. Adjusted Bonus Percentage: Percentages will be adjusted at        the end of the measurement period to apply the appropriate        incentive amount and cap the total bonus at $20,000 per service.    -   5. Verras measures, computes results and reports RIV data at the        end of year-one.    -   6. Bonus Distribution: MDs 75% and Hospital 25%    -   7. Formula for Bonus: Bonuses are calculated for each service.        -   A. Compute Hospital's Bonus: (Adjusted            Percentage×Departmental claims paid dollars)×0.25=Hospital            Bonus        -   B. Compute Total MD's Bonus: (Adjusted            Percentage×Departmental claims paid dollars)×0.75=MDs Total            Bonus        -   C. Compute Individual MD Bonus: MDs Total Bonus divided by            number of MDs in each service.            -   Example: Cardiopulmonary (11 MDs)                -   2% (Adjusted %)×$811,083 (Dept. Paid Dollars for                    service 1 (‘cardiopulmonary’)=$16,221 Total Bonus                    (Hospital and Physicians)                -   $16,221×0.25=$4,055 Total Hospital Bonus                -   $16,221×0.75=$12,166 cardiopulmonary service bonus                -   $12,166 divided by 11 MDs=$1,106 Bonus per MD        -   D. Formula Repeated for each Service.

4. CHANGES IN RESOURCE CONSUMPTION—Quality Metric 4 Financial (Changesin Departmental Paid Dollars)

(see Table 10 and Tables 17-22 ‘inpatient’ and Tables 23-28 ‘outpatient’on drawing sheets)

Data Sources

-   -   1. Verras aggregates Hospital Charges from hospitals' UHDDS.    -   2. Insurer's paid dollars

Uniform Hospital Discharge Data Set (UHDDS) is a part of standardprocesses all hospital medical records departments use to create medicalstatistics and billing data. Likewise, there are like processes thatinsurers use to process claims and pay medical bills to hospitals andphysicians.

Verras Process:

Decision support tool “Sherlock” arrays UHDDS data that has beenrisk-adjusted by either 3M—APR-DRGs or Yale DRGs using four quadrantgraphs for medical staff's Clinical Process Improvement activities.

-   -   1. Verras utilizes risk-adjusted data for the hospital and array        the data using the severity score of each patient within DRGs.    -   2. Verras physician and hospital quality personnel present        Sherlock generated data to physicians to implement Continuous        Quality Improvement activities (CQI)

Insurer's paid dollars used to determine bonus remunerations

-   -   3. Which Major Diagnostic Categories (MDC) and Diagnosis Related        Groups to assign to which of the clinical specialty groups.    -   4. Determine how many and which DRGs to include in the        computations for financial bonuses.    -   5. Determine which of the categories of dollars to be used for        bonuses: charges, costs, paid dollars etc.    -   6. Determine which of the paid dollar categories from the        insurer's data should be considered for bonuses (Inpatient,        Outpatient, Professional Dollars, etc.?)    -   7. Determine who and how the “improvements” are to be determined        for remuneration (Acceptable Indicators or mortality etc.)    -   8. Determine the relative impact on overall inpatient quality        that changes in resource consumption impart compared to other        medical indicators in order to build the algorithms        appropriately.    -   9. Determine the improvements that are attributable to the        hospital personnel and those to the physicians.    -   10. Determine geographic and therefore patient populations for        inclusion.    -   11. Calculate 3 year averages of insurer's paid dollars for EACH        of the clinical specialties.    -   12. Calculate the expected, year-end dollar resource        consumptions (expenditures) using insurer's inflation rates        (Inpatient 8.7%, Outpatient 5.5%, Professional 6.3%).    -   13. Decide of expected numbers of patients for Year One.    -   14. Determine the technique to be used for measuring weight        adjusted dollar averages at year's end.    -   15. Determine appropriate “Annual Improvement Percentage” that        determines “Bonus Percentage.”    -   16. Determine appropriate “Bonus Percentage” for providers'        remuneration.    -   17. Design and create Excel Spreadsheet algorithms to determine        bonuses and value-sharing.    -   18. Each clinical services' calculations must be treated        separately

Verras Algorithm

Bonus from Insurer:

-   -   1. Measurement: All Regional Medical Center (RMC) business        (commercial and Medicare)—all DRG's within each of 5        services—measured per service using Hospitals' charge masters'        charge amounts for Facility Inpatient and Facility Outpatient        only.    -   2. Bonus Criteria: Bonuses for changes in Resource Consumption        are dependent on the CMS & JCAHO Clinical Indicators and 38        Clinical Indicators being stable at an acceptable rate or        improved. (Acceptable—as defined by CMS, JCAHO and as determined        by the ratio of improved or stable of the 38 clinical indicators        compared to those that were degraded.)    -   a. Bonus: Insurer total claims paid dollars, Inpatient Facility        and Outpatient Facility only. Calculated per service for each of        5 clinical services for participating groups only for members        with addresses in the 6 county area (Jackson, Lake, Jefferson,        Lincoln, Toole and Tyler). Bonus is calculated based on actual        weighted average cost per case for the measurement year versus        expected cost per case for the measurement year, which,        initially, is year-one. Time period is dates of service Jan. 1,        2007-Dec. 31, 2007 for year one.    -   b. Expected costs are calculated based on three separate        expected inflation rates for Inpatient facility, Outpatient        facility and Professional Services as provided by insurer.        (Table 4A) The inflation rates were calculated based on the        covered amount on the claim.    -   3. Improvements/Degradations are calculated separately, per each        of 5 services and bonuses are dependent of Percent Improvements.    -   4. The 11 MDs in CV, CVS, Pulmonary and hospitalists are        considered as one department—Cardiopulmonary

IN-TEXT TABLE 4A Percentage Change (Expected by Insurer): ExpectedPercentage Inflation Place of Service Jan. 01, 2007-Dec. 31, 2007Facility Inpatient 8.7% Facility Outpatient 5.5% Professional Services -all places of 6.3% service

IN-TEXT TABLE 4B Bonus Percentage: Annual Improvement Percentage BonusPercentage 0.1% to 3.9%, 50% of improvement percentage 4.0% to 9.9%, 50%of improvement percentage 10.0% to 14.9%, 50% of improvement percentage15% or greater  8%

Bonus Distribution: 90% MD and 10% Hospital

Formula for Bonus [formula to be repeated for each of the 5services—inpatient and outpatient calculated separately]:

-   -   1. Calculate Expected Cost per Case for measurement year: Actual        Paid Dollar Cost for baseline year multiplied by Expected %        Inflation (see In-text Table 4A)=Expected Paid Dollar Cost per        case for measurement year    -   2. Determine Actual Weighted Ave. Cost per Case for measurement        year    -   3. Calculate Annual Improvement/Degradation: Expected Paid        Dollar Costs per case in measurement year minus Actual Weighed        Ave. Costs per case in measurement year=Annual        Improvement/Degradation Cost per case (Must be positive for        bonus)    -   4. Calculate the Annual Improvement Percentage: Annual        Improvement or Degradation amount divided by Expected Costs per        case=Annual Improvement Percentage    -   5. Annual Improvement Percentage determines Bonus Percentage        (Capped at 8%—Table 4B)    -   6. Actual Weighted Average per case in measurement year        multiplied by Bonus Percentage=Per Case Bonus    -   7. Per Case Bonus multiplied by Actual number of cases=Total        Bonus for Service        -   Total Bonus for Service×10%=Hospital Bonus        -   Total Bonus for Service×90%=Total MD Bonus    -   8. Total MD Bonus divided by number of MD's participating in        service=Bonus per MD    -   Example: (Cardiopulmonary Inpatient)        -   $10,659 (cost/case baseline year)×8.7% (Table 4A)=$11,586            Exp. cost/case measurement year $11,586 minus $10,571            (actual weighted Avg. measurement year)=$1,015 Annual            Improvement $1,015/$11,586=8.759% Percent Annual Improvement            8.759%×50% (see In-text Table 4B)=4.380% (Bonus Percent)            $10,571 (actual wt. avg./case measurement year)×4.380%=$463            per case bonus        -   $463 per case bonus×70 (est. measurement year number of            cases)=$32,410            -   Hospital Bonus (10%)—$3,241            -   Physicians' Bonus (90%)—$29,169            -   Bonus per MD (bonus/number of MD's in service—11)—$2,652

5. HOSPITAL READMISSION RATES—Quality Metric 5

Data Source

Rates that are manually abstracted by hospital personnel. Verras reportsresults.

Verras Process

-   -   1. Determine if or when to include in algorithm for remuneration        in year one and in subsequent years.    -   2. Determine the relative impact on overall inpatient quality        that readmission rates impart compared to other medical        indicators in order to build the algorithms appropriately.    -   3. Present the data to physicians for quality assessment and        improvement activities

No Bonus from Insurer:

Hospital readmission rates serve as a quality check on excessively lowLOS and/or high post-admission complication rates, but no bonuses willbe allocated for this indicator during year-one. This rate will bemonitored for RMC and HCN and reported to insurer by lameter.

6. CLINICAL PATHWAY PRODUCTION AND USE—Quality Metric 6 (see Tables29-33 on drawing sheets)

Data Source

Information accumulated during, the year by Hospital's quality assuranceprofessionals.

Individual Physician's Participation is Assessed by Hospital Personnel:

Verras Process

-   -   1. Determine levels of physicians' participation that generates        bonus    -   2. Determine bonus percentages associated with level of MD        participation.    -   3. Work with hospital quality staff to determine criteria of        participation    -   4. Determine which of the paid dollar categories from the        insurer's data should be considered for bonuses (Inpatient,        Outpatient, Professional Dollars, etc.?)    -   5. Determine who and how to present data at year's end    -   6. Determine “Bonus Percentage” for each “Level of Individual        Participation”    -   7. Determine the relative impact on overall inpatient quality        that the clinical pathway production and use imparts compared to        other medical indicators in order to build the algorithms        appropriately.    -   8. Determine the improvements that are attributable to the        hospital personnel and those to the hospital personnel    -   9. Design and Create Excel Spreadsheet Algorithms for bonuses        and value-sharing

Verras Algorithm

Bonus from Insurer:

Data Source

Verras reports participation using hospitals' information that ismanually abstracted.

-   -   1. Measurement: RMC's administration's Quality Assurance        personnel will determine each physician's percentage of group        participation within their service. (Cardiopulmonary,        Neurosurgery, Neurology, Orthopedics, OB/GYN).    -   2. Bonus: The bonus is calculated per service, based on        Inpatient Facility paid dollars only, for participating groups        only, and only for members with addresses in the six county        areas: Jackson, Lake, Jefferson, Lincoln, Toole, and Tyler.    -   3. Bonus Percentage determined by level of individual MD's        participation

IN-TEXT TABLE 6A Level of Individual Participation Bonus Percentage LessThan 50% Participation 0.00%  50% Participation bonus 0.10% 100%Participation bonus 0.20%

Bonus Distribution: 100% MD

Formula for Bonus [formula to be repeated for each of the 5 services]:

-   -   1. Determine bonus percentage based on level of individual        participation (from In-text Table 6A above).    -   2. Total Claims paid dollars for service×percentage bonus from        table above        -   Example: Each of six cardiopulmonary physicians has 50%            participation        -   0.10% (For 50% participation—Table 6A)×$811,043 (paid            dollars for cardiopulmonary service)=$811 bonus per MD    -   7. USE OF ELECTRONIC HEALTH RECORD (EHR)—Quality Metric 7 (see        Table 34 in drawing sheets)

Data Source

Cobalt Medicals recording of physician users of ChartBuilder® (EHR)

Individual Physician's Participation is Rewarded:

Verras Process

-   -   1. Determine number of physician participants, how to choose        them.    -   2. Determine level of participation that determines bonus.    -   3. Determine bonus calculations and value-based bonuses for        bonuses.    -   4. Determine the relative impact on overall inpatient quality        that the use of EHR imparts compared to other medical indicators        in order to build the algorithms appropriately.    -   5. Determine “Bonus Percentage” sliding scale.    -   6. Determine “Claims Paid Dollars” to define a sliding scale for        bonuses (Inpatient, Outpatient, Professional).    -   7. Design and Create Excel Spreadsheet Algorithms for bonuses        and value-sharing.

Verras Algorithm

Bonus from Insurer:

Data Source

Verras reports usage as compiled by Cobalt Medical the EHR Vendor.

-   -   1. Measurement: 24 physicians within initiative plus any other        participating physicians using approved EHR, to an estimated        number of 50 MDs. Initially, the bonuses are for using        ChartBuilder® with which to produce a typed, electronic medical        record. Providers must meet a threshold of 10% of patients using        the ChartBuilder® system during the final month of year one (or        an approved alternative system). ChartBuilder® and any alternate        system must provide transferable or shared medical records among        the participating physicians and the capability of gathering        SF-36 information on their patients for 6 months of year one.        Providers should begin collecting Health Status, Functional        Status and Satisfaction data at the 12-month measurement period;        however, this will not be a component of the bonus for year one.    -   2. Data provided by Verras and Cobalt Medical.    -   3. Bonus: Calculation based on data provided by Verras. Bonus        based on insurer total claims paid dollars: Professional        Provider Ambulatory Office only, for 153 listed MD's and only        their patients with addresses in the 6 county area: Jackson,        Lake, Jefferson, Lincoln, Toole, and Tyler.    -   4. Bonus Percentage: An increasing bonus percentage is applied        as total Professional Provider Ambulatory Office paid dollars        decrease to reward physicians' efficiencies in resource        consumption.

IN-TEXT TABLE 7A Claims Paid Dollars-Professional Provider BonusPercentage Ambulatory Office 0.000% Greater than $4,500,000 0.030%$4,400,000 to $4,500,000 0.035% $4,300,000 to $4,399,999 0.040%$4,200,000 to $4,299,999 0.045% $4,100,000 to $4,199,999 0.050%$4,000,000 to $4,099,999 0.055% $3,900,000 to $3,999,999 0.060%$3,800,000 to $3,899,999 0.065% $3,700,000 to $3,799,999 0.070%$3,600,000 to $3,699,999 0.075% $3,500,000 to $3,599,999 0.080% Lessthan $3,500,000

Bonus Distribution: 100% MD

Bonus Formula

-   -   1. Determine Bonus Percentage based on claims paid dollars for        professional provider ambulatory office (using In-text Table 7A        above).    -   2. Actual Total paid Claims Dollars for Professional Provider        Ambulatory Office multiplied by Appropriate Bonus Percentage        (see In-text Table 7A above)=Individual MD Bonus.    -   3. Individual MD Bonus multiplied by total number of MD's=Total        MD Bonus Example:    -   $4,250,000 (Total Professional Provider Paid Dollars)×0.040%        (see In-text Table 7A above)=$1,700/MD    -   $1,700×50 MDs=$85,000 Total Bonus to MDs

II. VALUE-SHARING COMPUTATIONS

(see Table 3 on drawing sheets)—(THIS SECTION WILL BE COMPLETED BYVERRAS AND INSURER AFTER BASELINE YEAR DATA IS RUN BY INSURER).

Data Source

Verras computes value-sharing distributions for physicians, hospitalsand insurer using information from all sources.

Verras Process

1. Collaborate with insurer to determine experiential, previous yearPMPM base rate.

-   -   2. Collaborate with insurer to determine experiential PMPM        inflation rate.    -   3. Determine the year one expected PMPM.    -   4. Determine the number of insurer's members.    -   5. Determine the “Target” PMPM using “flat” inflation rate.    -   6. Determine total paid dollar year one target.    -   7. Design and Create Excel Spreadsheet Algorithms for bonuses        and value-sharing    -   8. Determine dollars that are available for bonuses and        value-sharing using algorithm.    -   9. Determine a method of distributing available dollars if no,        or only a portion of value-sharing dollars are available (see        Tables 27-29).    -   10. Determine percentage of sharing between insurer, hospital,        physicians and Verras    -   11. Determine how start-up costs are covered, by whom and when.    -   12. Calculate Total Bonuses for Hospital and Physicians (see        Table 5).    -   13. Determine percentage of saving to be share between insurer,        providers and Verras (see Table 5).    -   14. Calculate Potential Value Share (see Table 5).    -   15. Calculate bonuses and value sharing, hospital and MDs (see        Table 5).    -   16. Calculate bonuses by service for MDs (see Table 6).    -   17. Calculate bonuses and value sharing for non-hospital MDs who        use ChartBuilder® (see Table 6).

Verras Algorithms

Value Sharing is the financial savings that result from improvedclinical quality that leads to the accrued “gains” in efficiencies. ThePer Member/Per Month (PMPM) trend of 7.1% will be used for theValue-sharing calculation, to more completely reflect the overallinflation and usage rates of change. The trend was established usinginsurer “covered dollars”. The measurement period for year one isprojected to be services incurred from the start of the project and torun through 12 months of data, with paid run out through the 4^(th)month thereafter.

Value Sharing is calculated using the example diagramed below. For thisexample, 2006 is used as the baseline year and 2007 as the measurementyear:

-   -   The 2006 Baseline PMPM amount is (insert amount here when        available).    -   This is based on covered dollars.    -   At the end of the 12-month observation period, plus the 4-month        claims run-out period, the following calculations will be        performed.    -   A. The 2006 Baseline PMPM will be adjusted after the end of the        observation period in order to account for benefit level        consistency. The resulting figure is the 2006 Adjusted Baseline        PMPM. This adjustment will be done in a fashion that facilitates        benefit level consistency between the baseline period and the        observation period.        -   Formula for 2006 Adjusted Baseline PMPM: =2006 Baseline            Covered PMPM×(2007 Observation Year Paid Dollars/2007            Observation Year Covered Dollars)    -   B. The result of “A” is the 2006 Adjusted Baseline PMPM formula        for 2006.        -   Adjusted, Trended Baseline PMPM=2006 Adjusted Baseline            PMPM×1.071    -   C. This Adjusted Trended Baseline PMPM will be multiplied by the        member months for the time period of year one. The member months        will be determined at the end of the 12 month measurement        period. Member months is the number calculated by adding the        number of members insured each month for each of the        corresponding months in a specific time frame. This result is        the 2006 Adjusted Trended Baseline Dollars that the providers        will try to improve upon. Formula for 2006 Adjusted Trended        Baseline that providers will try to improve upon:        -   =2006 Adjusted Trended Baseline PMPM×2007 Member Months    -   D. Calculate the Total Value Sharing Dollars. The following        formula will be used:        -   =2006 Adjusted Trended Baseline Dollars−Measurement Period            Paid Claim Dollars=(2006 Adjusted Trended Baseline            PMPM×Measurement Period Member Months)−(Paid Measurement            Period Dollars/Measurement period member            months)×Measurement. Period Member Months=(2006 Adjusted            Trended Baseline PMPM×Measurement Period Member Months)−Paid            Measurement Period Dollars    -   E. The resulting dollar figure represents the Total Value        Sharing Amount for the payout of (in this order) insurer startup        costs*, bonuses, and Remaining Value Sharing Dollars.        -   a. *Startup costs are:        -   $75,000 Implementation of ChartBuilder®—year 1; possibly            prorated for year 2        -   $30,000 Creation of insurer Initiative, Creation of reports            and data collection by Verras Medical, Inc.—year 1 and year            2        -   Actual approved cost of Education of Physicians, Purchasers,            and Insurer by Verras Medical, Inc.—year 1 and year 2. After            startup costs and bonuses are deducted, the Remaining Value            Sharing Dollars amount is divided as follows: 45% Insurer,            45% RMC/HCN, and 10% Verras Medical, Inc.        -   b. If, after insurer startup costs are deducted not enough            remains to pay out 100% of bonuses, the bonuses will be            pro-rated and no Remaining Value Sharing Dollars will be            paid. This means, that if 100% of bonuses cannot be paid,            the percentage of each bonus to be paid shall be the total            amount available from section (D) above, minus startup            costs, divided by the total of all bonuses to be paid.        -   c. if Paid Measurement Period Dollars are greater than the            2006 Adjusted Trended Baseline Dollars no dollars will be            paid out in insurer startup costs, bonuses, or Remaining            Value Sharing Dollars. Startup costs could be recovered in            later years if funds are available.

Adjustment to Value Sharing PMPM for Benefit Consistency Member PMPMsYear Covered $ Paid $ Months Covered Paid Example 1: 2006 (Baseline)$12,100,000 $7,744,000 220,000 $55.00 $35.20 2007 $13,409,000 $8,179,490230,000 $58.30 $35.56 (Observation) 2006 Adjusted Baseline PMPM: $33.55= $55.00 × [$8,179,490/$13,409,000]. 2006 Adjusted, Trended BaselinePMPM: $35.93 = $33.55 × 1.071 Example 2: 2006 (Baseline) $12,100,000$7,744,000 220,000 $55.00 $35.20 2007 $13,409,000 $8,984,030 230,000$58.30 $39.06 (Observation) 2006 Adjusted Baseline PMPM: $36.85 = $55.00× [$8,984,030/$13,409,000]. 2006 Adjusted, Trended Baseline PMPM: $39.47= $36.85 × 1.071

EXAMPLE SCENARIOS Example 1

Sufficient funds available to recoup startup costs, pay physician andhospital bonuses, and Remaining Value Sharing Dollars.

$18,000,000.00 Adjusted Trended Baseline PMPM × member months$16,500,000.00 Less Actual claims paid data $1,500,000 Amount remainingfor payout of insurer startup costs and bonuses $1,500,000.00 Amountremaining from above $120,000.00 Less startup costs $1,380,000.00 Amtremaining for bonus $1,380,000.00 Amount remaining from above$700,000.00 Less bonus amount $680,000.00 Remaining Value SharingDollars Amount $306,00000 Amt remaining from above × 45% for Insurer$306,00000 Amt remaining from above × 45% for RMC and HCN $68,000.00 Amtremaining from above × 10% for Verras Medical, Inc.

Example 2

Sufficient funds available to recoup insurer startup costs, paypro-rated physician and hospital bonuses; no Remaining Value SharingDollars.

$18,000,000.00   Adjusted Trended Baseline PMPM × member months$17,436,402.00   Less Actual claims paid data $563,598.00 Amountremaining for payout of insurer startup costs and bonuses $563,598.00Amount remaining from above $120,000.00 Less startup costs $443,598.00Amt remaining for bonus $443,598.00 Amount remaining from above$700,000.00 Less bonus amount $(256,402.00)In this example, amount remaining is not sufficient to pay calculatedbonuses, so Prorate. Divide $443,598.00 by $700,000.00. Result is63.371%Calculated bonus amounts will be multiplied by 63.371% to determineactual bonuses to be paid.

In this example, there are no Remaining Value Sharing Dollars toallocate.

Example 3

Insufficient funds available to recoup insurer startup costs, payphysician and hospital bonuses, or Remaining Value Sharing Dollars.

$18,000,000.00 Adjusted Trended Baseline PMPM × member months$18,436,702.00 Less Actual claims paid data   $(436,702.00) No dollarsavailable for startup costs, bonuses, or Remaining Value Sharing DollarsIn this example, the actual claims paid amount is greater than thebaseline trended PMPM×member months,so that insurer startup costs, bonuses, and Remaining Value SharingDollars are not paid.

4.0 VALUE SHARING SUMMARIES (see Table 5 on drawing sheets)

These examples use baseline year of 2006 and measurement year of 2007(Dollar amounts in this section are for illustration purposes only.)

4.1. Total Bonus Summaries:

Examples:

Hospital + Physicians (Total) $273,745 Hospital Bonuses (Total) $63,922Physicians' Bonuses (Total) $209,823 Individual MD Bonus Ave. Service 1$4,445 Individual MD Bonus Ave. Service 2 $4,235 Individual MD BonusAve. Service 3 $1,141 Individual MD Bonus Ave. Service 4 $14,269Individual MD Bonus Ave. Service 5 Individual MD Bonus as ChartBuilder ®User $1,700

4.2. Potential Value-Share Calculations:

(Assumes 2007 paid dollars equals 2006) 2006 Actual Spending $12,958,843Projected 2007 Paid Dollar spending $13,878,921 (7.10% > 2006 rate)Total Value Sharing Dollars Available 2006/2007 (TBD) $920,078 (delta)Less Insurer Expenses −$105,000 Less Total Bonuses Paid 2007 −$273,745Remaining Value Sharing Dollars to be Shared $541,333 Value SharingDollars to Insurer (45%) $243,600 Value Sharing Dollars to Hospital andMDs (45%) $243,600 Value Sharing Dollars to Verras Medical (10%) $54,133

4.3. By Physician Overall:

Value Share to Hospital + MDs $243,600 Less Hospital Expense −$30,000Value Share to MDs $213,600 Value Share to 24 Hosp. MDs (33%) $71,129Value Share to each Hosp. MD $3,744 Value Share to ChartBuilder ® Users(67%) $142,257 Value Share to each CB User $2,845

4.4. By Total MD Bonuses by Service for ChartBuilder® Users:

-   -   1. Cardiopulmonary (Service 1):

Bonus Service 1 $5,058 Bonus ChartBuilder ® $1,700 Value Share $3,744Value Share-CB $2,845 Total $13,347

-   -   2. Neurosurgery (Service 2):

Bonus Service 2 $5,024 Bonus ChartBuilder ® $1,700 Value Share $3,744Value Share-CB $2,845 Total $13,313

-   -   3. Neurology (Service 3):

Bonus Service 3 $1,677 Bonus ChartBuilder ® $1,700 Value Share $3,744Value Share-CB $2,845 Total $9,966

-   -   4. Orthopaedics (Service 4):

Bonus Service 4 $14,863 Bonus ChartBuilder ® $1,700 Value Share $3,744Value Share-CB $2,845 Total $23,152

-   -   5. OB/GYN (Service 5):

Bonus Service 5 $11,111 Bonus ChartBuilder ® $1,111 Value Share $1,111Value Share-CB $1,111 Total $11,111

4.5. By Total MD Bonus for Non-Hospital ChartBuilder® Users:

Bonus ChartBuilder ® $1,700 Value Share - CB $2,845 Total $4,545

With respect to the above description then, it is to be realized thatthe optimum dimensional relationships for the parts of the invention, toinclude variations in size, materials, shape, form, function and mannerof operation, assembly and use, are deemed readily apparent and obviousto one skilled in the art, and all equivalent relationships to thoseillustrated in the drawings and described in the specification areintended to be encompassed by the present invention. Therefore, theforegoing is considered as illustrative only of the principles of theinvention. Further, since numerous modifications and changes willreadily occur to those skilled in the art, it is not desired to limitthe invention to the exact construction and operation shown anddescribed, and accordingly, all suitable modifications and equivalentsmay be resorted to, falling within the scope of the invention.

The above description, together with the objects of the invention andthe various features of novelty which characterize the invention, arepointed out with particularity in the claims annexed to and forming apart of this disclosure. For a better understanding of the invention,its operating advantages and the specific advantages attained by itsuses, reference should be made to the accompanying drawings anddescriptive matter in which there are illustrated preferred embodimentsof the invention.

Furthermore, the purpose of the foregoing abstract is to enable the U.S.Patent and Trademark Office and the public generally, and especially thescientists, engineers and practitioners in the art who are not familiarwith patent or legal terms or phraseology, to determine quickly from acursory inspection the nature and essence of the technical disclosure ofthe application. The abstract is neither intended to define theinvention of the application, which is measured by the claims, nor is itintended to be limiting as to the scope of the invention in any way.

APPENDIX A CMS and JCAHO Quality Indicators

JCAHO Core Measure Sets (Update as of Jul. 1, 2005), Group 4 (Pregnancy)is monitored by Iameter at this time but is not reported to JCAHO.

-   -   1. AMI (Acute Myocardial Infarction)—Nine (9) individual        measures that are all from chart abstraction        -   a. Aspirin at arrival        -   b. Aspirin prescribed on discharge        -   c. ACE Inhibitors for LVSD        -   d. Adult Smoking Cessation counseling        -   e. Beta blocker on arrival        -   f. Beta blocker prescribed on discharge        -   g. Thrombolytic agent received within 30 min. of hospital            arrival        -   h. PTCA within 90 min. of hospital arrival        -   i. AMI Compliance Index    -   2. Pneumonia Care        -   a. Oxygenation assessment        -   b. Pneumococcal vaccination given or screened        -   c. Blood cultures performed before first antibiotic received            in hospital        -   d. Pneumonia care Compliance Index        -   e. Initial antibiotic received within 4 hrs. of hospital            arrival    -   3. Heart Failure        -   a. Discharge instructions—includes a set of 6 different            instructions        -   b. LVF assessment        -   c. ACE Inhibitor for LVSD        -   d. Adult smoking cessation counseling        -   e. Heart Failure Compliance Index    -   4. Pregnancy—KRMC and HCNW have not elected to incorporate the        OB section in their CMS/JCAHO reporting. This is not included in        bonus for CMS/JCAHO Core Measures.        -   a. VBAC        -   b. Third or fourth degree laceration        -   c. Neonatal mortality        -   d. Cesarean delivery rate    -   5. Surgical Infection Prevention (SIP)        -   a. Antibiotic within 1 hr. of incision        -   b. Antibiotic selection        -   c. Antibiotic discontinued within 24 hrs.        -   d. Surgery Infection Prevention Compliance Index

APPENDIX B CLINICAL, RATE-BASED INDICATORS (38) Clinical Indicator NameDescription Hospital Mortality Rate Percent of patients that died - riskadjusted MDC Mortality Rate Percent of patients that died by MDC - riskadjusted DRG Mortality Rate Percent of patients that died by DRG - riskadjusted AMI Mortality Rate Percent of patients admitted with acutemyocardial infarction that died. AMI Mortality Rate - Percent of femalepatients admitted with acute Female myocardial infarction that died. AMIMortality Rate - Percent of male patients admitted with acute Malemyocardial infarction that died. Hospital Re-Admission Percent ofpatients readmitted within 30 days Rate CABG over 96 hr Mech. Percent ofCABG patients with greater than Vent 96 hours of mechanical ventilation.Complicated Deliveries Vaginal delivery with complications C-SectionPatients with surgical delivery of a fetus through incision in theabdominal wall and the uterine wall. Does not include removal of thefetus from the abdominal cavity in case of rupture of the uterus orabdominal pregnancy. Prolonged LOS - GYN GYN Surgery with LOS >10 DaysSurgery High Risk Obstetrics Patients with complicated obstetrical needsVaginal Del. with 4^(th) Patients with rupture or tear involving analDegree Laceration sphincter, rectovaginal septum, and anal mucosa. VBACPatients with vaginal birth after cesarean section CVA w/ Aspiration CVApatients with aspiration pneumonia Pneumonia Decubitus Ulcer - Medicalpatients with decubitus ulcer (post- Medical admission and co morbid)Line Sepsis Rate - Patients with Bacteremia and/or Sepsis due to MedicalService a vascular device, implant, or graft (post- admission and comorbid) Nosocomial pneumonia Medical patients who have a secondarydiagnosis of pneumonia except those in Respiratory MDC. Surgical Percentof all coronary artery procedures Revascularization Rate resulting in aCABG Post-admission All medical patients with a secondary AspirationPneumonia diagnosis of aspiration pneumonia Post-admission Percent ofmedical patients with septicemia Septicemia (post-admission and comorbid). Post-admission Percent of medical patients with ThromboembolismThromboembolism (post-admission or co morbid). Postoperative AspirationSurgical patients who have a secondary Pneumonia diagnosis of aspirationpneumonia Postoperative DVT - Orthopedic patients with Deep VeinOrthopedic - Lower Thrombosis of the lower extremity ExtremityPostoperative Surgical patients who have secondary Hemorrhage diagnosisof hemorrhage postoperatively. Postoperative Cardiac surgical patientswho have secondary Hemorrhage - diagnosis of hemorrhage postoperatively.Cardiac Surgery Postoperative Orthopedic surgical patients withhemorrhage Hemorrhage - Orthopedic postoperatively. Surgery - LowerExtremity Postoperative Infection Surgical patients with postoperativeinfections (wound infections). Postoperative Infection - Cardiacsurgical patients with postoperative Cardiac Surgery infections (woundinfections). Postoperative Infection - Surgical patients withpostoperative infections Orthopedic Surgery (wound infections).Postoperative Pneumonia Surgical patients with postoperative pneumoniaPostoperative Orthopedic surgical patients with Pneumonia - Orthopedicpostoperative pneumonia Surgery Postoperative Pulmonary Percent ofsurgical patients with pulmonary Embolism embolism. PostoperativeRespiratory Surgical patients with Respiratory Arrest ArrestPostoperatively Postoperative Septicemia Surgical patients withsepticemia postoperatively. Prolonged LOS - CHF CHF patients with Lengthof Stay over 10 days Postoperative UTI Surgical patient with urinarytract infection postoperatively. Nosocomial UTI Percent of medicalpatients having UTI not in a DRG for urinary tract infections.

1. A computer-implemented system for healthcare performance measurementand equitable provider reimbursement comprising: gather medicalinformation from hospital patients charts data, hospital medical recordsdepartment data, insurance company data, and physician's office dataaggregate the gathered data wherein said aggregation of data includesthe use of a Sherlock computer program sub-system and memory databasewhich targets cases by type, physician, severity and clinical services,diagnoses and procedures at a revenue code level, use of resources andcreate graphics by case; wherein said Sherlock computer sub-systemaggregated data is further analyzed by a Watson based computersub-system which explains diagnoses and procedures by who by specificphysician, what and why, sequence of events and what was not documented,explains specific resources by specific type of tests, breakdown ofdrugs, identifies why extra days were spent in hospital, and converts totrue costs, and create a best practices framework by database ofclinical variation by diagnosis and procedure, establishes acomputerized physician order entry (CPOE) customization and facilitatesclinical pathway construction; and calculating the following qualitymetrics: those National Hospital Quality Measures (NHQM) as determinedto be mandated by Centers for Medicare and Medicaid Services (CMS),patient satisfaction, morbidity, mortality, reduction in variation(RIV), and resource consumption; calculate an index of qualityimprovement (IQI) for each healthcare provider; generate value sharingcomputations and calculate overall net savings; and distribute said netsavings to physicians, hospitals, Accountable Care Organizations (ACOs),CO-OPs and insurers in the form of reimbursements.
 2. (canceled) 3.(canceled)
 4. A computer-implemented system for healthcare performancemeasurement and equitable provider reimbursement according to claim 1,wherein said system includes the element of ranking quality metrics asto importance for predicting quality and financial incentives, prior tocalculating an index of quality improvement (IQI) for each healthcareprovider.
 5. A computer-implemented system for healthcare performancemeasurement and equitable provider reimbursement according to claim 1,wherein said index of quality improvement (IQI) is calculated using thesix enumerated metrics and ambulatory outcomes (AMB.O) and AccountableCare Organization metrics (ACO.M) outpatient physician's offices as aseventh metric added to the IQI calculation.
 6. A computer-implementedsystem for healthcare performance measurement and equitable providerreimbursement according to claim 1, wherein said IQI is tracked for oneor more healthcare providers and for one or more years, with resultingIQI performance trend information sent to employers, consumers, publicagencies, CO-OPs and hospital personnel for the purpose of makingdecisions regarding healthcare provider performance and improvement. 7.A computer-implemented system for healthcare performance measurement andequitable provider reimbursement according to claim 1, wherein qualityassurance and equitable reimbursement system (QAERS) algorithms areemployed to generate value sharing computations and calculate overallnet savings.
 8. A computer-implemented system for healthcare performancemeasurement and equitable provider reimbursement according to claim 7,wherein said value sharing computations and calculate overall netsavings are used to calculate reimbursement rewards to be distributed tohospitals, clinical practice groups and physicians.
 9. Acomputer-implemented system for healthcare performance measurement andequitable provider reimbursement according to claim 1, wherein AIMtechnology algorithms are employed to aggregate data gathered frommedical information from hospital patients charts data, hospital medicalrecords department data, insurance company data, and physician's officedata, prior to providing the resulting information to a Sherlocksub-system.
 10. A computer-implemented system for healthcare performancemeasurement and equitable provider reimbursement according to claim 1,wherein said IQI is calculated using future metrics at which time thebecome recognized national standards for measuring quality assurance andefficient performance of healthcare providers.
 11. Acomputer-implemented method for using a system for healthcareperformance measurement and equitable provider reimbursement, comprisingthe steps of: (a) gathering medical information from hospital patientscharts data, hospital medical records department data, insurance companydata, and physician's office data; (b) aggregating the gathered datawherein said aggregation of data includes the use of a Sherlock computerprogram sub-system and memory database which targets cases by type,physician, severity and clinical services, diagnoses and procedures at arevenue code level, use of resources and create graphics by case;wherein said Sherlock computer sub-system aggregated data is furtheranalyzed by a Watson based computer sub-system which explains diagnosesand procedures by who by specific physician, what and why, sequence ofevents and what was not documented, explains specific resources byspecific type of tests, breakdown of drugs, identifies why extra dayswere spent in hospital, and converts to true costs, and create a bestpractices framework by database of clinical variation by diagnosis andprocedure, establishes a computerized physician order entry (CPOE)customization and facilitates clinical pathway construction; andcalculating the following quality metrics: National Hospital QualityMeasures (NHQM), patient satisfaction, morbidity, mortality, reductionin variation, resource consumption; (c) calculating an index of qualityimprovement for each healthcare provider; (d) generating value sharingcomputations and calculating overall net savings; and (e) distributingsaid net savings as a reimbursement to physicians, hospitals,Accountable Care Organizations (ACOs), CO-OPs and insurers in the formof reimbursements.
 12. (canceled)
 13. (canceled)
 14. Thecomputer-implemented method for using a system for healthcareperformance measurement and equitable provider reimbursement accordingto claim 11, wherein said method includes the step of ranking qualitymetrics as to importance for predicting quality and financialincentives, prior to said step of calculating an index of qualityimprovement (IQI) for each healthcare provider.
 15. Thecomputer-implemented method for using a system for healthcareperformance measurement and equitable provider reimbursement accordingto claim 11, wherein said index of quality improvement (IQI) iscalculated using the six enumerated metrics and ambulatory outcomes(AMB.O) and Accountable Care Organization metrics (ACO.M) fromoutpatient and physician's offices as a seventh metric added to the IQIcalculation.
 16. The computer-implemented method for using a system forhealthcare performance measurement and equitable provider reimbursementaccording to claim 11, wherein said IQI is tracked for one or morehealthcare providers and for one or more years, with resulting IQIperformance trend information sent to employers, consumers, publicagencies, CO-OPs and hospital personnel for the purpose of makingdecisions regarding healthcare provider performance and improvement. 17.The computer-implemented method for using a system for healthcareperformance measurement and equitable provider reimbursement accordingto claim 11, wherein quality assurance and equitable reimbursementsystem (QAERS) algorithms are employed to generate value sharingcomputations and calculate overall net savings.
 18. Thecomputer-implemented method for using a system for healthcareperformance measurement and equitable provider reimbursement accordingto claim 17, wherein said value sharing computations and calculateoverall net savings are used to calculate reimbursement rewards to bedistributed to hospitals, clinical practice groups and physicians. 19.The computer-implemented method for using a system for healthcareperformance measurement and equitable provider reimbursement accordingto claim 11, wherein AIM technology algorithms are employed to aggregatedata gathered from medical information from hospital patients chartsdata, hospital medical records department data, insurance company data,and physician's office data, prior to providing the resultinginformation to a Sherlock sub-system.
 20. The computer-implementedmethod for using a system for healthcare performance measurement andequitable provider reimbursement according to claim 11, wherein said IQIis calculated using future metrics at which time they become recognizednational standards for measuring quality assurance and efficientperformance of healthcare providers.